Recycling costs concern directors

By Jadyn Watson-Fisher Times Recordjwatsonfisher@swtimes.com

Thursday

Nov 29, 2018 at 12:15 AMNov 29, 2018 at 1:13 PM

While Fort Smith may want the topic of recycling in the city to be forgotten like waste at the landfill, because of conversations about the cost of the process and pending litigation, it’s going to keep coming back.

The Board of Directors discussed the worth of recycling considering the cost when looking at the 2019 budget.

Incoming At-large Director Robyn Dawson said the cost is “sinking the budget” and “we’re going in the hole every day for recycling.” She wants to look at doing something different.

Sanitation is expected to bring in a revenue of $15.3 million for 2018 and have expenses of $15.8 million, according to a budget addendum provided by Finance Director Jennifer Walker. These figures are both down from what the city budgeted for, and it was expected the department would operate at a loss this year.

Next year, Walker is anticipating there will be $15.7 million in revenue for the department and $15.4 in expenditures. Once capital equipment requests are figured in, however, Walker said the department should finish 2019 approximately $6,000 under budget.

Foreman wrote in an email Wednesday the city entered into an agreement with a company called Arcadis a couple of years ago, which analyzes utilities departments and makes recommendations based on historical information. He said it looks at the customer base, market data, funding, equipment needs and projects, among other variables.

Fort Smith has two rate increases coming, Foreman said, with a 9 percent recommended revenue increase in 2023. He mentioned the department hasn’t seen much of additional revenue, though, due to waste weighing less and companies looking to go “zero waste.”

The department’s budget summary indicates operating costs $10.6 million. It has set aside $535,000 for waste reduction, including $22,000 for printing. This is material provided to schools and residents to promote recycling. $163,000 is for recycling containers, which Foreman said are largely funded through grants, but the department budgets for them in case the money is not available.

A statement of revenue shows the city anticipated receiving $154,000 this year through recycling operations but may only bring in $20,000.

Recycling services are included in collection fees and not a separate charge.

“At what point do we decide this isn’t worth it financially?” Ward 4 Director George Catsavis asked.

Not settling for recycling

The directors discussed at the Tuesday study session a recycling lawsuit settlement offer from the attorneys of Jennifer Merriott.

Merriott is suing Fort Smith for its use of recycling trucks from October 2014 to May 2017 to discard recyclable materials at the landfill.

According to an email sent to Colby Roe of Daily and Woods, the city’s legal counsel, the plaintiff is demanding $1.15 million from the city to compensate residents who paid for sanitation services during that time.

A report by LeRoy Duell of Keen and Co. CPAs says it cost the city nearly $148,000 in rear loader capital equipment and containers. The report suggests it cost $935,400 in labor and $192,000 to operate the rear loaders.

The report says it cost $1.25 million for all residential recycling costs. It estimates 92 percent of materials were taken to the landfill, therefore, the city should refund residents for 92 percent of the costs incurred.

City Attorney Jerry Canfield told Ward 1 Director Keith Lau he believes any restitution would have to come out of sanitation’s budget, because it received citizen payment.

Meaning, residents would have essentially paid for their own refund had the board agreed to the settlement.

Canfield also said the lawsuit hinges on ideas of illegal exaction and unjust enrichment.

Whitfield Hyman, one of the plaintiff’s attorneys, said in an email illegal exaction has a broad definition of “any attempted invalid spending or expenditure by a government official.” This means any misuse of funds can be challenged.

Unjust enrichment is when one party receives something it’s not entitled to which “must be restored.” There must also be an “operative act, intent or situation” that would make the benefit considered unjust, Hyman said.

Canfield believes neither idea applies and recommended not settling.

“This is an enterprise fund supported by the charges by sanitation customers,” Canfield said. “There are no tax dollars involved, thus it cannot be an illegal exaction under Arkansas law.”

According to the 2019 budget, 100 percent of the department’s allocation comes from the sanitation operating fund. No other source, such as the general fund, is specified.

The lawsuit, however, alleges Fort Smith invalidly used money for waste disposal under the guise of recycling, despite the lack of tax dollars.

Circuit Judge Stephen Tabor wrote in a denial of the city’s request for summary judgement this doesn’t apply. There may not have been tax dollars, but Tabor said a jury could find the fees could’ve been lowered if trucks and containers weren’t used or purchased.

Tabor also questioned whether the sanitation price was reasonable. He said the trucks were running “at tremendous expense” simply to give the impression recycling was occurring, even though the regular fleet “could have handled the load.”

The city maintains the position unjust enrichment doesn’t apply either, because it didn’t profit from the lack of recycling and residents benefited from services.

“I have no interest in the settlement offer,” Ward 3 Director Mike Lorenz said. “Just as a reminder, there’s a contractual agreement for the city of Fort Smith to provide sanitation services to the residents, which is what they’re paying for. We have fulfilled that contract by picking up the refuse from the houses, regardless of what truck it was in or where it went afterwards. We fulfilled our obligation to our citizens by picking up the trash every week.”

Canfield said he doesn’t believe courts have the authority to tell Fort Smith how to operate sanitation vehicles or what to do with the materials.

Tabor, however, rejects those assertions. He said there is an “issue of material fact” to whether sanitation fees were fair since the public was paying for a service it did not receive and whether the fees were used to pay for what the city called a recycling program.

“If it was, then it is unpersuasive to argue that no enrichment occurred when a service was advertised, paid for and then not delivered,” Tabor said.

‘It’s the right thing to do’

For many years, China imported 45 percent of the world’s plastic and dealt with it. Then it stopped. It banned imported plastic at the end of 2017, citing plastic contamination impacted local environments. There’s now excess plastic in other nations without the infrastructure to handle it.

A National Geographic report said China’s ban revealed what had long been happening: people have been dutifully separating their various containers into “taxpayer-financed” bins, because they believed it would be turned into something else, but it was actually being shipped overseas.

The report says 111 million tons of plastic could be “displaced” by 2030 and most of the recycling is likely ending up in local landfills, similar to what Fort Smith experienced.

Canfield told the directors the “market for waste products, which kept recycling efforts alive, crashed,” so the suppliers of the recycling services were not available.

Fort Smith has a contract with 3rd Rock Recycling, ending July 2019. The department can extend it for one year until July 2020.

City leadership wants to begin discussions on how to move forward with the recycling issue at the beginning of next year.

“At the end of the day, recycling costs us money, but it’s the right thing to do, in my opinion,” Foreman said. “Any audience that will listen to me talk about how to recycle, what to recycle, the cost of recycling — I will gladly get up and do the song and dance.”

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